How could stop-buy order reduce your loss exposure

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Reference no: EM131825710

Assume that you short-sell 500 shares of a stock at a price of $45 a share at a 50% initial margin.

A. If, after one year, the price fell to $35 and paid a $2 dividend, what would be your return on investment?

B. If, after one year, the price instead rose to $50 and paid a $2 dividend what would be your return?

C. How could a stop-buy order reduce your loss exposure?

D. If the maintenance margin was 25%, at what price would you receive a margin call?

Reference no: EM131825710

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